But the company also said that it is highly unlikely to hit its earlier earnings forecast of $1.45 to $1.55 a share, due to a steep drop in natural-gas demand.

NiSource
NI, +0.05%
President and Chief Executive Robert C. Skaggs said in a statement accompanying the report that the drop in gas sales is expected to trim 2006 net revenue by about $40 million, or 10 cents per share, from earlier estimates.

At the same time, the company declined to provide a revised earnings estimate, citing the "increased unpredictability of customer usage and customer attrition in the current environment." The company said that sales to residential users were hit especially hard, as homeowners conserve gas or switch to other, less expensive means of staying warm.

The warning trigged a sell-off of the stock by disappointed investors. NiSource shares fell 71 cents, or 3.1%, to close at $22.26.

NiSource, whose utility subsidiaries provide gas and power to some 3.8 million customers in a patchwork of service territories stretching from the Gulf Coast and the Midwest to New England, said that its second-quarter operating income rose to $39.1 million, or 14 cents a share, from $24.4 million or 9 cents a share a year earlier.

The results matched the 14 cents a share expected by analysts polled by Thomson First Call.

Income from continuing operations rose to $21.5 million, or 8 cents a share, from $8.3 million or 3 cents a share a year ago, while revenue rose to $660.2 million from $633.3 million.

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